Global News January 06, 2016

  1. Bloomberg
  2. Global News January 06, 2016

Zero Hedge

“Bitcoin Tumbles After China Urges Investors To Be «Rational»

After warning about cracking down on ‘virtual’ capital outflows earlier in the week, Chinese officials have come out more directly against Bitcoin this morning with the country’s central bank urging China’s institutional and individual investors should take a rational approach to investing in virtual currencies. Bitcoin in China has legged lower on the news.

Bitcoin prices had showed abnormal fluctuations, the Shanghai head office of the People’s Bank of China (PBOC) said in a notice.

This prompted branch officials to meet representatives of a major bitcoin trading platform in China, BTCC.

They cautioned against potential risks in the platform’s operations and asked it to carry out «self-inspection» according to the law, the bank said.

It stressed bitcoin is not a currency and cannot be circulated as a real currency in the market.

The reaction is clear with Bitcoin China tumbling to 5700 Yuan – down 35% from record highs…

Of course, this is no surprise, as we noted earlier, for those buying the dip here in bitcoin, having been driven by Chinese momentum, we urge readers to be cautious as by now the PBOC has certainly noticed that the digital currency remains one of the final, and most successful, means of bypassing capital controls in China. Should Beijing mandate that bitcoin no longer be a means to illegally transfer capital offshore, there is risk of an even more dramatic, and sharp, drop in its price.



“Goldman’s Bet on Emerging Currencies Is BRICS Without the ‘C’”

Goldman Sachs Group Inc., home to the team that conceived the BRIC framework for investing in the largest emerging markets, is urging investors to «stay the course» with bets on the currencies of Brazil, Russia and India, along with South Africa.

China, South Korea and other Asian economies are vulnerable to U.S. President-elect Donald Trump’s protectionist election manifesto translating into policy and regulatory action. By contrast, Brazil, Russia, India and South Africa are less at risk, Goldman analysts reckon.

“Mapping U.S. ‘swing state’ job losses with emerging-market-U.S. trade flows suggests that these ‘good carry’ candidates appear less likely to face U.S. import restrictions because their exports compete less directly with U.S. labor,” the Goldman analysts wrote.

The analysts cited improving balance of payments, falling paths for inflation, attractive real yields and prospects for stronger growth this year in the four big emerging markets they favor.

China’s yuan could potentially fall further than 7.3 per dollar by year-end, Goldman said. Accelerated capital outflows, or depreciation carried out as a policy response to Trump protectionism, are among the risk scenarios.

“The best times to gain exposure to dollar-yuan weakness have tended to be when China concerns were off radar screens, or after periodic interventions that flushed out bearish speculative positions and provided attractive entry points,” the Goldman analysts wrote. “That remains our view today.”